{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.indusind.com\/iblogs\/fixed-deposit\/power-of-compound-interest-on-fixed-deposit\/#BlogPosting","mainEntityOfPage":"https:\/\/www.indusind.com\/iblogs\/fixed-deposit\/power-of-compound-interest-on-fixed-deposit\/","headline":"Power of Compound Interest: How it Operates on Fixed Deposit (FD)","name":"Power of Compound Interest: How it Operates on Fixed Deposit (FD)","description":"Compound interest has the power to transform your savings and investments significantly over time. Unlike simple interest, which is calculated only on the principal amount, compound interest is calculated on both the initial amount and the interest that accumulates. This difference might look nominal but can lead to substantial growth in the value of an...","datePublished":"2024-09-25","dateModified":"2024-09-25","author":{"@type":"Person","@id":"https:\/\/www.indusind.com\/iblogs\/author\/indusind_bank_pfx_team_indperformics-com\/#Person","name":"CONVONIX Antony","url":"https:\/\/www.indusind.com\/iblogs\/author\/indusind_bank_pfx_team_indperformics-com\/","image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/7d15b864167d3868c12ffdda340cc1c9?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/7d15b864167d3868c12ffdda340cc1c9?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"IndusInd","logo":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","width":201,"height":86}},"image":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/Power-of-Compound-Interest-How-It-Operates-in-Fixed-Deposits.jpg","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/Power-of-Compound-Interest-How-It-Operates-in-Fixed-Deposits.jpg","height":288,"width":764},"url":"https:\/\/www.indusind.com\/iblogs\/fixed-deposit\/power-of-compound-interest-on-fixed-deposit\/","about":["Fixed Deposit"],"wordCount":953,"keywords":["compound interest in fd","fixed deposit","fixed deposit interest rates"],"articleBody":"Compound interest has the power to transform your savings and investments significantly over time. Unlike simple interest, which is calculated only on the principal amount, compound interest is calculated on both the initial amount and the interest that accumulates. This difference might look nominal but can lead to substantial growth in the value of an investment, especially over the long term.One of the most common and secure ways to benefit from compound interest is through Fixed Deposits (FDs).How Does Compound Interest Work in Fixed Deposits?When you open a fixed deposit account with a bank, you agree to lock your funds for a specified tenure at an agreed-upon interest rate. The frequency of compounding plays a crucial role in determining how much interest your deposit will earn. The more often interest is compounded, the more you earn since interest is calculated on both the principal amount and the interest already earned. Let’s understand clearly with the two examples below:Annual Compounding in Fixed DepositsIf the interest is compounded annually, the calculation process involves adding interest to the principal once a year. For instance, consider an FD investment of \u20b91,00,000 with a yearly interest rate of 6%, compounded annually. The growth would be as follows:End of year 1: \u20b91,00,000 + 6% of \u20b91,00,000 = \u20b91,06,000 -H3End of year 2: \u20b91,06,000 + 6% of \u20b91,06,000 = \u20b91,12,360 -H3End of year 3: \u20b91,12,360 + 6% of \u20b91,12,360 = \u20b91,19,102 -H3End of year 4: \u20b91,19,102 + 6% of \u20b91,19,102 = \u20b91,26,248 -H3End of year 5: \u20b91,26,248 + 6% of \u20b91,26,248 = \u20b91,33,823 -H3You may wonder, does a fixed deposit compound interest quarterly as well? Yes, this option does exist and can significantly boost your financial outcome. Let\u2019s find out how below.Quarterly Compounding in Fixed DepositsConsider the same investment of \u20b91,00,000 at an annual interest rate of 6%, but this time, the interest is compounded quarterly. By the end of the first year, your total amount would be approximately \u20b91,06,136. This amount is higher than with annual compounding because interest is added to the principal every 3 months instead of once a year.Want to Maximise Returns from Compound Interest? Choose IndusInd Bank FDsIndusInd Bank Fixed Deposits offer best-in-class interest rates, which means more growth for your hard-earned savings and additional returns through the enhanced compounding effect. Besides higher FD interest rates and growth, look at the additional benefits you get:Hassle-free instant bookingOpen your FD online in just three easy steps. Simply apply online, provide your PAN and Aadhaar details, and deposit the amountAuto-renewal optionEnjoy the convenience of auto-renewal to continue your investments hassle-freeVideo KYCComplete a video KYC instantly and book an FD of any amountTax saver FDSave on taxes by booking a five-year tax-saver FD.Flexible tenuresChoose tenures that fit your financial goals, from short-term to long-term optionsAlso Read: Different Types of Fixed DepositsKey TakeawaysDifferent compounding frequencies, such as annual or quarterly, impact your FD returns in various ways. The power of compounding turns time and patience into wealth and grows your FD investment exponentially over the years. This might explain why compound interest is often considered as the eighth wonder of the world by many investors.Choose IndusInd Bank Fixed Deposits to enjoy competitive rates and leverage the power of compounding to its fullest potential. Moreover, the convenience of online booking and flexible tenures allow you to customise your FD investments to your financial goals. So, why wait? Let your hard-earned savings grow significantly over time. Apply now!Disclaimer:The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct\/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.Share This:"}